Sept. 20 (Bloomberg) -- Natural gas futures fell for the
second time this week in New York on the outlook for milder
weather that may limit demand for the power-plant fuel.

Gas slid 0.9 percent as forecasts showed that above-normal
temperatures in the central U.S. next week will give way to
seasonal readings across most of the country Sept. 30 through
Oct. 4, according to Commodity Weather Group LLC in Bethesda,
Maryland. A stockpile gain last week was a record low for the
time of year after a surge of hot weather.

“The heat really has subsided,” said Teri Viswanath,
director of commodities strategy at BNP Paribas SA in New York.
“The expectations are that we are probably looking at some
pretty stout injections ahead and that will likely pressure
prices slightly lower.”

Natural gas for October delivery fell 3.3 cents to $3.687
per million British thermal units on the New York Mercantile
Exchange, the lowest settlement price since Sept. 13. Trading
was 20 percent below the 100-day average at 2:37 p.m. Prices
rose 0.3 percent this week, capping the fifth gain in six weeks,
and are up 10 percent this year.

The discount of October to November futures widened 0.1
cent to 7.6 cents. October gas traded 33.7 cents below the
January contract, compared with 33 cents yesterday.

October $3.60 puts were the most active options in
electronic trading. They were 0.1 cent higher at 1.6 cents per
million Btu on volume of 292 at 3:02 p.m. Puts accounted for 57
percent of trading volume. Implied volatility for November at-the-money options was 29.27 percent at 3 p.m., compared with
29.49 percent yesterday.

Mild Weather

The high in Philadelphia on Sept. 23 may be 70 degrees
Fahrenheit (21 Celsius), 5 lower than average, according to
AccuWeather Inc. in State College, Pennsylvania. The high in
Houston will be 92 degrees on Sept. 24, 5 above normal, before
dropping to seasonal readings of 85 at the beginning of October.

Power generation accounts for 32 percent of U.S. gas
demand, according to the Energy Information Administration, the
Energy Department’s statistical arm.

“Despite our somewhat bullish bias, the fundamental
factors continue to work against the bull case,” John Kilduff,
partner at Again Capital LLC and editor of the Energy OverView
newsletter in New York, wrote today. “There are still no
storms of consequence threatening Gulf of Mexico production.
Fall officially arrives this weekend, and that ushers the second
shoulder season of the year.”

The National Hurricane Center said a low-pressure system
over the southwestern Gulf of Mexico has a 20 percent chance of
turning into a tropical cyclone in the next two days. The storm
is about 100 miles (161 kilometers) northeast of Tampico,
Mexico, the center said.

A disorganized system of cloudiness and showers located a
few hundred miles south of Bermuda has a 20 percent chance of
strengthening in the two days, the center said.

Tropical Weather

Storms in Gulf waters are closely watched for potential
disruptions to offshore production. The Gulf will account for
5.6 percent of U.S. gas output this year, EIA data show.

U.S. gas inventories expanded by 46 billion cubic feet to
3.299 trillion in the week ended Sept. 13, below the five-year
average gain of 74 billion for the period, the EIA said
yesterday. It was the smallest injection into storage for the
time of year in EIA data going back to 1994. A supply surplus to
the five-year average narrowed to 0.5 percent from 1.4 percent
the previous week, the smallest since July.

Gas Rigs

The gas-rig count fell by 15 this week to 386, the biggest
drop since the seven days ended March 29, Baker Hughes Inc. data
today showed. The rig count has dropped 10 percent this year.

Increased efficiency in directional drilling and hydraulic
fracturing, or fracking, makes it economical to tap gas trapped
in shale formations, such as the Marcellus in the Northeast.
Output is growing even as conventional dry-gas drilling hovers
near the lowest level in 18 years.

Total U.S. marketed gas output may increase by 1.1 percent
this year to a record 69.91 billion cubic feet a day, the EIA
said in its Sept. 10 Short-Term Energy Outlook.